1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

How I do my pricing

Discussion in 'Offline Marketing' started by pieking, Feb 9, 2012.

  1. pieking

    pieking Registered Member

    Joined:
    Oct 22, 2011
    Messages:
    54
    Likes Received:
    38
    Well, I've seen quite often that people are very interested in venturing out into the offline marketing world, but hit a speed bump when it comes to pricing. Setting your own prices can be somewhat intimidating when you think about the diverse budgets your different potential clients will be working with. Its nothing new to you guys that you wouldn't charge an ice cream shop the same price you would an apartment complex. Just how much the prices should differ and why is where people tend to hit a snag.

    It seems like a common method is to check your competitors prices and simply just be cheaper than them. While it is key to know your competitors prices, your prices only need to be based on them in the loosest sense.

    I'm going to break it down step-by-step on how I price my clients. Its not quick and easy, it requires effort and dedication, but your clients will also see that you priced your services to them objectively, and not subjectively.

    1.) Know your personal limits and boundaries:

    This is really a one time step, but I think it is an important one. First set your minimums, and your maximums. When conducting a sales pitch, it is always good to have your lowest and highest prices hammered into your brain. If the lowest you'll offer your work for is $400 per month, then have that mindset when discussing prices.
    If your potential client tries to work you down to something lower, don't. If you're working for less than you think your work is worth, you aren't going to want to put as much effort into the client which can never lead to good things.
    On the other hand, know your highest limits just as well. Figure out what you think your skill set and/or resources can justify. If your client feels that they're paying a pretty penny for sub-par work, problems will arise.

    My personal boundaries are no lower than $450/month but no higher than $2000/ month

    2.) Know your client, or perspective client:

    Getting to know your client, and more importantly their business, is done in two ways. Both are great to do, but only one is completely necessary.
    The first way is to actually get to know the person who you are working with. Clients will be more comfortable giving their money to someone they've spent some time with.
    The other way is to do some research on their business that will give you hard numbers to figure out your pricing with. The first bit of research I do is to find keywords that I think potential customers of their business would find them by searching.

    2a.) Finding the best keywords:

    The tool I use for this is simply Google keyword tool. Its fast, and my clients know who Google is. Here I've included an image showing the two keywords I would use for my figures, and to present to the clients. I choose two to three that I find to be most relevant, and gets the highest traffic and cost per click.

    [​IMG]

    2b.) Using the keyword information in the pricing formula:

    Now I have two keywords selected that get a good amount of traffic and would be highly relevant to finding an apartment in evansville indiana. We see that the combined traffic of both keywords would equal 24700 searches per month. What I do with that is get the mean value of traffic of the selected keyword. The way to find the mean value is to simply take the sum of the traffic for the keywords, and then divide that by the number of keywords used.

    In this case it would be (14,800 + 9,900) / 2
    which results in a mean value of 12,350 searches per month. The key is to then take that number and and decide how much of that traffic would your services help to convert into sales.

    3.) Key statistics to consider when formulating the price:

    One is that many people search the same thing multiple times before making a decision about it. This means we can't go off assuming that just because we have this juicy number of 12,350 means that we're going to charge them as if 12,350 separate people searched that term in a month.

    Another is that just over half the people who search on the internet look at reviews made by others or that over three quarters of them trust user reviews over 'expert' reviews and believe that online reviews are the most trusted form of advertisement.

    Consumers are actually willing to pay higher prices for businesses that get good reviews. (7878)

    4.) Using all these figures to generate our price:

    Earlier I calculated the mean number of monthly searches for the keywords I selected. So now we have a base number to work with: 12,350. Let's now take this number and apply the statistics I mentioned earlier.

    Since there is no solid figure that defines how many times people search for something before they make a decision, we will have to use our heads and a bit of logic during this step. What I would do in this situation, since we're talking possible places of living, is assume that those conducting the searches are going to thoroughly research their options. Taking that into consideration I would assume they are searching the keyword more than a few times. What I'm going to do is generate a number based on 10, 15, and 20 times.

    12,350 / 10 = 1235 so close to 1200 people
    12,350 / 15 = 823.33 so close to 800 people
    12,350 / 20 = 617.5 so close to 600 people

    The next step is to take this number and then apply that just over 50% of internet users look at reviews online.

    1200 / 2 = 600
    800 / 2 = 400
    600 / 2 = 300

    Then we take that figure and apply that over 75% of these people are using these reviews to make their decision.

    600(.75) = 450
    400(.75) = 300
    300(.75) = 225

    So now we've dwindled down those searches to a figure that seems much more appropriate and accurate than the original 12,350, so basically at this point you decide which one will be the most appropriate to go off of.

    4.a) Using this information to select an appropriate price and pitch it to the prospect:

    At this point in the game is where we do the real number crunching to come up with the price. What I like to do to pitch these figures to the prospect is thoroughly walk them through this process of applying the logic and statistics to get down to our final number (450, 300, or 225) and then explain to them at they are standing to lose this many potential customers in the current state of them getting poor reviews.

    I like to keep my price around what I like to keep my adsense CTR at, under 2% :cool: So you've now shown them what they have to gain with your services, now here's the logic behind the price.

    At the apartment complex that is targeted in this scenario, the average monthly rent for their places is $425. So if they stand to gain 300 potential customers by using my services, they could potentially gain (in the best case scenario) $127,500 worth of business. Applying my 2% or less rule, I'll go with 1%. So, I would charge them $1,275 per month under the understanding that they stand to gain much more.

    Well everyone, there is an example of how I would approach pricing for a customer that is based on some real figures and not just "what sounds good". If you want to come in here and say that this is a bad method or that nobody should pay attention, thats fine.. but just remember to read the title and realize that I'm not boasting this as some groundbreaking method.. just a look at how I do things.
     
    • Thanks Thanks x 3
    Last edited: Feb 9, 2012
  2. Balthazshar

    Balthazshar Junior Member

    Joined:
    Jan 3, 2010
    Messages:
    165
    Likes Received:
    108
    Why are you using broad searches to estimate traffic? Isnt that misleading?
     
  3. Dannn

    Dannn Newbie

    Joined:
    Jun 1, 2011
    Messages:
    36
    Likes Received:
    13
    Occupation:
    Executive Director - Maryland SEO Firm
    Location:
    USA
    Exactly what I was thinking. I use 'exact' for clients which is substantially less than broad, but much more accurate.

    For example (and something I've seen too often) it could have 12,000 broad searches, but 150 exact searches.
     
  4. pieking

    pieking Registered Member

    Joined:
    Oct 22, 2011
    Messages:
    54
    Likes Received:
    38
    perhaps I've missed out on what is classified a broad or an exact search. I thought broad was when people search for the keyword without "" and exact is when they search -->"apartments in evansville"<--

    it seems I may have been misguided?
     
  5. sanjeev2010

    sanjeev2010 Junior Member

    Joined:
    Oct 11, 2008
    Messages:
    199
    Likes Received:
    88
    Occupation:
    DMPK
    Location:
    New England
    Broad match allows your ad to show for searches on similar phrases and relevant variations.
    • Example: kittens
    • Searches that can match: kittens, kitten photos, adopt a kitten

    Phrase match allows your ad to show only for searches that include the exact phrase and possibly other words as well.
    • Example: "adopt a kitten"
    • Searches that can match: adopt a kitten, how to adopt a kitten

    Exact match allows your ad to show only for searches that use that exact phrase and no other words.
    • Example: [adopt a kitten]
    • Search that can match: adopt a kitten


    Negative match ensures that your ad doesn't show for any search that includes that term.
    • Example: -free
    • Searches that won't match: free kitten adoption, free kitten calendars, who wants to free the kittens
     
    • Thanks Thanks x 2
    Last edited: Feb 9, 2012
  6. Talsin

    Talsin Regular Member

    Joined:
    Mar 18, 2010
    Messages:
    385
    Likes Received:
    107
    Indeed you have been misguided. It's a common mistake amongst noobies when doing keyword research. The highlighted numbers in this instance are way off the actual search figures for the terms in question. Those two terms combined get less than a thousand actual searches a month.

    Wierdly though I think your end number of 300 potential customers a month is probably still accurate. Though not because of the maths you presented obviously :p.
     
    • Thanks Thanks x 1
  7. sanjeev2010

    sanjeev2010 Junior Member

    Joined:
    Oct 11, 2008
    Messages:
    199
    Likes Received:
    88
    Occupation:
    DMPK
    Location:
    New England
    Great post PK.

    I just read it briefly, so apologies if you've mentioned this, but you always want to bear in mind what your expects costs will be when you offer a client a quote, especially if you're going to outsource the work.
     
    • Thanks Thanks x 1
  8. fmstatic

    fmstatic Newbie

    Joined:
    Feb 5, 2012
    Messages:
    17
    Likes Received:
    2
    Appreciated reading through your methodology
     
    • Thanks Thanks x 1
  9. pieking

    pieking Registered Member

    Joined:
    Oct 22, 2011
    Messages:
    54
    Likes Received:
    38
    I've always thought I was part psychic. :lol:

    well I don't wont to guide people to misguide so I'm assuming I should delete this thread?
     
  10. sanjeev2010

    sanjeev2010 Junior Member

    Joined:
    Oct 11, 2008
    Messages:
    199
    Likes Received:
    88
    Occupation:
    DMPK
    Location:
    New England
    Nope, still a useful way of establishing a fee structure. Besides, people do use broad match when sending information to clients.
     
  11. singingsleep

    singingsleep Regular Member

    Joined:
    Dec 13, 2008
    Messages:
    408
    Likes Received:
    384
    Occupation:
    Jack of all trades, master of... well... several,
    Location:
    Inbox
    I like the effort that went into this thread that addresses something that is a big problem for some, including me. I spent an entire evening coming up with a general price structure.

    Personally, and I don't know if this is the right thing to do since I'm not very experienced at selling SEO, I do exact search, and figure that roughly 1/3rd of them will end up either purchasing or being extremely interested in said service (I always calculate things conservatively), if they were in the top spot. Then I figure in how much the mean (not median) sale per customer would be. Then I think about how often a new client is liable to return to said business, aka lifetime value (this requires research, will vary by location, demographic and other factors).

    So say you've got a restaurant that you think you can bring 200 new customers that will spend an average of $75 with the client, that's 15k. I wouldn't feel bad charging between $250-$500/mo for said phrase.

    I think it's good to research this stuff, that way if people want to know what they're getting for their money you can break it down for them. Also, if you mention that you're cheaper than the competition, also mention that there's a reason the competition costs so much-- cite how many hours the project is going to take per month (of course you can pad this number) and that by the time all is said and done they're only paying $x/$xx per hour for the services.
     
  12. dragon123

    dragon123 Regular Member

    Joined:
    Sep 28, 2010
    Messages:
    263
    Likes Received:
    59
    Thanks for the thread, broad search can be used as bait, most clients wont know the difference just use common sense. If its a business with a high value customer, say an apartment rental then 1 new customer will bring them $450 a month, if its a lower figure, 1 new restaurant customer will only bring them in approx $75 then price according to that.
    There are other factors of course such as how long will it take to get them to the first page of Places based on how much competition the keyword has and if you promised such a thing which i would not, i just say i will try my best.
    It is very tempting to offer a low price just to get the deal, but your just devaluing your service by doing it.
     
    Last edited: Feb 9, 2012
  13. mil0x

    mil0x Power Member

    Joined:
    May 27, 2008
    Messages:
    702
    Likes Received:
    643
    Occupation:
    ??
    Location:
    Somewhere on the net..
    Personally I have all the data [number of visitors, number of calls they get, number of e-mails they get] already before I approach them (I use the rent-out-a-ranked-site model).

    I do use exact search, but my experience is that most KW's have more people searching for it than G shows. Either way, I bring it to the client as a 'in the worst case scenario' you'll receive xx amount of phone calls/xx amount of e-mails etc, so they won't feel I overcharge them. My personal limit is no clients under $600/month..

    I take a percentage [18%] of what I think they will make in sales of customers that 'I' provide them with [an absolute minimum, in this example I use $800 as the average, but they could have clients worth $3000 as well].

    My formula is like this:
    Number of visitors the site gets per month/100*Conversion rate percentage that call or e-mail them/100*Conversion rate percentage that I think the business will close as an actual client = the customers you bring them * the average customer (lifetime) value = how much the business will make of my services/100*My percentage (18%) = how much I charge them per month.

    So for example my site gets 220 visitors, 15% of them convert into 'leads' (I track this), the company is able to close 1 out of 4 or 25% of them into a sale. This means they get 8.25 or rather 8 customers from using my service. The average customer value is $800 so they make $6400 [as a bare minimum]. I charge 18% from that per month. Total charge for such a client would then be $1152 per month.